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Howard Marks Warns Against AI Hype and Bubble Risks as AI Stocks Decline in 2025
The chipmaker Nvidia Corp., along with other stocks tied to artificial intelligence and related exchange-traded funds, has experienced a significant drop in value during 2025. Despite the persistent excitement surrounding the artificial intelligence sector, this decline has led to concerns about possible market bubbles.
What Happened: In early January, Howard Marks, who is the co-founder and co-chairman of Oaktree Capital Management, released his latest memo titled ‘On Bubble Watch’. In a podcast episode called ‘Behind the Memo – On Bubble Watch’ with Harry Whitelaw, Marks discussed how artificial intelligence is set to revolutionize various industries. He highlighted that the novelty and excitement surrounding AI have created an environment without any historical precedent.
He noted, “That’s a great precursor for the kind of enthusiasm that sometimes leads to bubbles.” Marks pointed out that the combination of excitement for innovations and the fear of missing out is a powerful driver that he has observed repeatedly throughout his career.
This cautionary outlook is reflected in the poor performance of AI-related stocks and sectors throughout 2025. Although new technologies like DeepSeek are anticipated to boost demand for AI, the overall weakness in the sector is obvious following the exuberance seen in 2024.
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corporation NVDA | -9.76% | 46.42% |
| Apple Inc. AAPL | -1.01% | 37.86% |
| Microsoft Corp. MSFT | -5.16% | -4.32% |
| Amazon.com Inc. AMZN | -3.75% | 19.36% |
| Alphabet Inc. Class C GOOG | -9.71% | 28.26% |
| Meta Platforms Inc. META | 11.51% | 34.13% |
| Tesla Inc. TSLA | -22.74% | 55.76% |
| Palantir Technologies Inc. PLTR | 12.92% | 253.18% |
| Oracle Corp. ORCL | 0.02% | 45.59% |
Moreover, AI-focused exchange-traded funds (ETFs) have also shown disappointing results in 2025.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF IYW | -3.06% | 14.53% |
| Fidelity MSCI Information Technology Index ETF FTEC | -3.80% | 13.40% |
| First Trust Dow Jones Internet Index Fund FDN | 1.09% | 20.90% |
| iShares Expanded Tech Sector ETF IGM | -2.19% | 16.18% |
| iShares Global Tech ETF IXN | -2.50% | 9.97% |
Why It Matters: Marks, known for predicting the dot-com bubble, raised alarms once again with his memo ‘On Bubble Watch’ on January 7. He pointed out various warning signs in today’s market, including inflated valuations, hype surrounding AI, and excessive dependence on large technology companies.
He referenced research from JP Morgan Asset Management which indicates that high market valuations today are often followed by mediocre returns over the next decade. Marks emphasizes the importance of being mindful of these risks, especially amid elevated market valuations. He advocates for a cautious approach to investing.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 and Nasdaq 100 indices, have experienced gains. On a recent trading day, the SPY gained 1.56%, reaching $594.18, while the QQQ also rose 1.56%, now priced at $508.10, based on data from financial analysis tools.
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